Executive Summary

The storage of carbon dioxide (CO2) is broadly accepted today among numerous international organizations as necessary in order to achieve present emission reduction targets in a timely manner. As a result, Carbon Capture and Storage (CCS) technologies are set to play a central role as an emission mitigation solution across the global economy and as such are included within the framework of existing pragmatic plans to reduce anthropological emissions. By 2050, the International Energy Agency (IEA) projects that 3,400 CCS projects would represent 20% of the necessary effort to stay below a global average temperature increase of 2°C (corresponding to a CO2 atmospheric concentration of 450ppm by 2100). Following IEA, Green House Gases (GHG) reduction costs would potentially be 70% higher without CCS technologies.

Figure 1: Global CCS project deployment - IEA Blue Map scenario[30]

The first major milestones for this achievement are the G8 objective and commitment to support “the launching of 20 large-scale CCS demonstration projects globally by 2010 taking into account various national circumstances with a view to beginning broad deployment of CCS by 2020”. Although not formally endorsed by any jurisdiction, the IEA analysis [29] recommends that 100 projects should start commercial injection by 2020 in order to keep abreast with existing GHG mitigation targets (2°C increase by 2100).

The availability of CO2 storage options in a timely manner for CCS projects shall drive this ambitious deployment. Storage exploration, as any other geological activity, is not always successful. As such, some of the storage sites might not achieve their intended industrial scale for technical reasons. Additionally, the above mentioned deployment scale and milestones must take into account the necessary and often fixed development time of such storage sites.

Such fast track development needs a quick and strong political support as well as a state-based financial funding scheme that must be consistent with typical development time required for the storage part of the CCS chain. Like all activities related to geology, storage operations are not straight forward: 4 to 12 years are necessary to confirm the bankability of a storage site1. After such bankability threshold, 1 to 3 years are needed to start industrial injection2. Therefore, investments required for storage characterization and bankability assessment must be anticipated soon enough not to jeopardize deployment targets as set out above.

Several countries have developed financing scheme and set incentives to deploy CCS technology. It is now legitimate to assess on the storage standpoint if the current effort could allow developing the number of CCS projects needed to attain the 2°C global temperature increase target by 2100. In this analysis, we took into account storage sites development success (or failure) rates and development time to properly quantify the appropriate number of sites to be launched so as to meet the 450ppm scenario of IEA in 2020 and 2050. As far as storage site developments are concerned, 2020 is tomorrow. This is the primary objective of this study that was commissioned by IEAGHG and Global CCS Institute.

The study then gives insights to meet the 2050 recommendation.

For this report, Geogreen has employed a bottom-up analysis to allow policy makers to better understand:

Whether a sufficient number of “bankable” storage projects exist to meet the storage needs implied by the current global commercial-scale CCS deployment goals,

Where the storage development gaps exist, globally and regionally, if the number of bankable sites is found to be insufficient, and

How to address any identified gaps through appropriate work programs (including estimated timing and costs).

To answer these questions we developed specific storage development workflows which explain the steps needed for storage characterization. These workflows follow a probabilistic approach to assess the costs and development times of the storage bankability assessment of CCS projects.

Our analysis showed an obvious gap between the effort currently engaged in CCS and what is needed according to IEA 450ppm scenario. The key points of the answers for the two first questions are given in the next section:

The gap between existing effort and what is required by 2020:

CO2 storage development deserves more attention from policy makers and emitters

Storage site bankability assessment takes time because it is an iterative process as with all industrial activities dependent on geological characteristics. The level of geological knowledge in an area has a significant impact on storage development costs and times up to bankability. Additionally, taking into account regulation requirements for Deep Saline Formation (DSF) and Depleted Oil and Gas Fields (DOGF), between 4 to more than 15 years in worst cases for DSF may be needed to develop a storage site up to bankability.

Most of existing projects might achieve storage bankability between 2017 and 2020 and be commercial by 2018-2023.

The required investments for storage bankability assessment are marginal as compared to overall CCS chain capital needs. It represents generally less than 10% of the latter. A lack of investment in the storage part of a CCS project in the first years of development may lead to important delays in commercial scale start-up and development objectives achievement. Given the required number of CCS projects to meet the IEA recommendation, public funding currently in place for storage development are not at the appropriate scale.

The current number of projects is not appropriate to deliver 100 commercial projects by 2022-2025

The study shows that there is a structural failure rate of storage bankability assessment of 15 to 20% at world level linked to technical (mainly geological) factors. Consequently, the gap of commercial projects by 2025 is around 60.

Non technical failures like financing, public acceptance and regulation can be very important and further widen the gap. If we take into account past observed cancellation rate of CCS DSF projects, only between 30 and 40 of the 54 announced large scale projects could become bankable, at best. In that context, the gap of commercial projects by 2025 would be more than 85 projects.

Such gap can be decreased when including CO2-EOR projects.

The regional distribution of the gap is as follows:

On the technical standpoint, OECD Europe and Australia have enough projects launched in order to meet IEA 2020 regional recommendation;

Even if North America is leader in CCS development, additional projects are needed to meet IEA 2020 regional recommendation;

More than 45 technically bankable projects (45% of the needed 100 projects) are missing in developing countries.

The existing incentives and funding schemes are not adapted to the climate change objectives

The 21 billion Euros earmarked thus far for large scale CCS projects concern only developed countries. Currently, there is no major public funding announcement for developing countries although their expected contribution to the overall effort of CCS deployment is close to 50%.

Worldwide, the present level of funding would only allow between 14 (32) and 21(46) projects without (with) CO2-EOR to be financially sound and developed.

Even G8 objectives of 20 commercial scale CCS projects might not be achievable in the time window without CO2-EOR.

Taking into account what CCS industry is able to technically deliver and including EOR, it is possible to obtain 100 bankable storage sites by 2025 only if between 85 and 97 storage bankability assessments are financed by 2012. Between 1 -3bn€3 extra public funding would allow launching enough storage bankability assessments to have 100 storage sites ready by 2022 / 2025.

CO2-EOR is an opportunity that might reduce necessary public funding on the short term but is not available in all regions

In the current financing framework, CO2-EOR has the potential to increase by 70 to 80% the number of projects that can reach bankability

For storage bankability assessment, CO2-EOR could reduce public funding to obtain 100 bankable storage projects by 2022-2025. Such reduction could be up to 50% (0.5 to 1.5bn€). One shall note that public funding should still be necessary for development of capture and transport parts of the chain if global incentives are too weak to justify private investments (low CO2 price for instance).

The contribution of CO2-EOR to the global effort is limited by the following factors:

On the mid-to-long term, CO2-EOR projects might require the development of nearby aquifer storage projects in order to cope with CO2 emission reduction constraints (constant flow rate of captured CO2 during the plant life time).

They are not distributed evenly between countries (oil and gas producing provinces).

Not all fields are suitable for conversion to CO2 storage or CO2-EOR.

There is a specific time window of opportunity that can be used for conversion of the field. This window of opportunity depends on each field producing costs versus oil and gas prices and also upon technical constraints (among others, water invasion of the reservoir, surface facilities compliance with CO2 rich streams).

Public acceptance issues over CO2-EOR projects funding should not be neglected. In time of financial austerity, public acceptance of CO2-EOR funding might jeopardize project developments and therefore diminish CO2-EOR contribution to storage in some regions. Moreover, the current debate about shale gas production in some countries, particularly in Europe, might damage public’s trust towards project developers.

All types of storage must contribute to the global effort

Depleted Oil and Gas fields and CO2-EOR although being attractive options suffer from some limiting factors such as their location limited to oil and gas producing provinces, the impossibility to convert safely all the fields and the time window issue.

Deep Saline Formations present a huge potential but are not well known and need more time and money to be developed.

Figure 3: Cumulative distribution of the number of projects with CO2-EOR (Low case - 23 projects)

How to fill the 2020 gap through appropriate work programs?

The following 5 actions should be taken to develop CCS to the scale needed to mitigate global warming.

Improve the knowledge of subsurface in areas where large volumes of CO2 might be captured in order to save development time for future commercial CCS projects.

To avoid further delay in meeting IEA recommendation, the first phase of CO2 storage development, generally a national or regional level capacity assessment, should be launched rapidly by policy makers. However, one shall note that as of today, no jurisdiction has endorsed this target as policy.

This phase, 1 to 2 years long, provides a framework for discussion and development of local storage projects. The following Figure 4 shows the areas where such an effort should be focussed on. In these areas, extensive oil and gas production data if made available, could lead to initial capacity characterization with the use of desk based assessment only (no need for new data acquisition in this first step).

In addition to project financing issues, there are two other causes of non technical failure for storage project development: not adapted regulatory framework and public acceptance issues.

Having a regulatory framework for CO2 storage is very important for the project developers to evaluate the cost and time effort needed in the characterization phase. Indeed, regulatory framework for industrial CO2 storage will have an impact on CO2 storage characterization process.

As an example of key regulatory aspects, the issue of medium to long term liabilities is very important to settle for project developers, since it impacts the costs and risks of the project.

Public acceptance is another key issue to be addressed. It is particularly true for onshore storage projects. Active government support and proper local communities up-front involvement are mandatory to make public understand the key reasons and outcomes of CCS deployment. There is a long way to go in order to promote CCS benefits for climate change mitigation, territorial development, societal and local stakeholders.

Increase or create incentives for private stakeholders to launch bankability assessment as soon as possible to avoid further time delays

There is not enough public funding to attain100 bankable projects by 2020 or even 2025. There are also very limited incentives for private investors to invest in storage bankability assessment although this phase is time consuming (4 to 10 years or more), and represents a marginal cost as compared to the overall CCS investment.

It would therefore be wise to finance storage characterization programs in order to have storage sites ready when emission mitigation incentives will be sufficient to sustain private investment in CCS (expected between 2020 and 2030).

This storage characterization programs should be preferably located next to important CO2 emission hubs.

If we consider CO2-EOR contribution, our analysis shows that at least 42 large scale new storage bankability assessments (30 DSF/DOGF and 12 EOR) should be launched by 2012 in order to obtain 100 storage sites by 2025. The 30 DSF/DOGF projects represent an extra public funding requirement ranging between 0.5bn€ and 1.5bn€ worldwide (this assumes an overall subsidies rate of 50% to 75% per project for the storage part). Actually, we assume that the necessary assessment costs for bankability of the 12 CO2-EOR projects are made by the oil field operators themselves for the sub-surface part, with no contribution from public funding.

However, there are huge regional discrepancies in terms of financing. While some countries like the US or China, can widely use CO2-EOR, others regions in Europe, OECD Asia and Africa do not have the same extent of mature oil fields to exploit for CO2-EOR. In order to launch necessary storage development in emerging economies, an international mechanism should be developed to allow fund transfer from the North to the South. It is not clear whether or not the Kyoto Clean Development Mechanism is adapted to this mission. CDM stream of revenue is available only when the projects as started and storage bankability has already been assessed. Nevertheless, as mentioned earlier, the CO2 price perspectives are not sufficient to convince private investors of developing storage projects at the needed scale.

Increase or create incentives to provide a business case to CCS

The inclusion of CCS under CDM mechanism in Cancun is a first positive step to provide a revenue stream to projects in developing countries. However, the perspectives over CCS-CDM methodology acceptance timeline are still uncertain. As shown in this study, storage development in developing countries can be less costly than in developed countries.

Lack of revenue stream to these projects could jeopardize the achievements of storage development ambition.

Capitalize on low cost industrial early opportunities and BECCS

CCS is often associated with coal or fossil fuel power generation because the power sector is a huge contributor to CO2 emissions. However, as mentioned in IEA World Energy Outlook and Energy Technology Prospective, almost half of global CCS deployment should concern emissions from other industrial sectors.

Opportunities of low cost capture exist for industrial sources with high CO2 purity. These “easy to capture” sources are located in industrial basin worldwide and storage bankability assessment efforts should be focussed in consistency with their locations.

Such interesting opportunities can be identified in developing countries. Among them we can mention bio ethanol production associated with CCS (leading to a net reduction of atmospheric CO2), natural gas processing, ammonia and fertilizer production, and refining activities under development in Africa, Middle East, South East Asia, China and India.

As they might potentially be carbon sinks for CO2 from the atmosphere, the Biomass Energy with CCS projects [24] might be an efficient early opportunity as long as the biomass is grown in an environmentally responsible way. Such projects may catch up part of the delay in implementation of the GHG mitigation objectives, since biomass being carbon neutral, more carbon is stored than emitted. Policy makers should provide these projects with an adequate framework to monetize non anthropogenic CO2. Such early opportunities have been recently studied by UNIDO [54].

Finally, we would like to stress the importance of early planning of storage development and assessment. In a decarbonised world a CO2 storage site can be an incentive for development of territories and industrial areas.

Good examples of this concept are the CCS hubs presently being studied like the Tee Valley in UK, the Rotterdam Climate Initiative in the Netherlands. Alberta is also looking to on territorial development by subsidising a CO2transport network where sources and sinks could be connected.

How to achieve the required deployment by 2050?

The four main drivers relative to storage project development beyond 2020 and 2030 are:

Storage development time will reduce and success rate will increase due to better knowledge of subsurface, of CO2 storage mechanism, and experienced regulatory frameworks.

Storage site developed in 2020 might reach end of life by 2050 and will have to be replaced by new injection sites.

Important regional differences exist in terms of capacity and source sink matching. This leads to the development of massive CO2 transport facilities.

More than 100bn€ would be needed to develop 3750 storage bankability assessments as .proposed by the IEA “Blue Map” This should be supported by private stakeholders if the necessary incentives are in place.

Some key challenges will have to be faced in the decades to come to meet the ambitious development targets:

Behaviour of CO2 in the subsurface must be carefullyassessed and adequate tools developed, building in part on the experience gained through EOR. . This is a critical point to define the numbers of projects that can be developed in a given area and assess their long term interferences.

CCS network development is an important near term step for sound storage project deployment. Many R&D projects are currently underway. The importance of storage networks in terms of territory development and jobs creation as well as their feasibility should be broadly assessed. All storage options must be considered in a timely manner to ensure long term storage availability.

Long distance and cross-border issues for CO2 transport will have to be addressed for countries with limited national storage capacities. This is a major challenge in terms of cost, regulation, and public acceptance. Joints efforts between industrial and public stakeholders seem necessary to develop such infrastructures.

1 A storage site is bankable if it has been evaluated such that sufficient confidence exists in technical and cost elements to support final decisions for commercial-scale investment.

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